Kelly William Cobb

Today, Americans for Tax Reform condemned the Federal Communications Commission’s (FCC) adoption of a Notice of Inquiry aimed at regulating broadband Internet. The plan, known as the “third way,” would reclassify the Internet as a Title II telecommunications service in order to enact Net Neutrality and other regulations.

Kelly William Cobb, executive director of Americans for Tax Reform’s Digital Liberty Project, released the following statement:

“In the face of overwhelming bipartisan opposition from the U.S. Congress, courts, and the American public, FCC Chairman Genachowski has opted to buck our system of checks-and-balances to continue his ruthless campaign to regulate the Internet. The FCC has failed to provide any evidence of a market failure to justify these actions, instead relying on hypothetical scenarios of consumer abuse. The FCC has no authority under current law to regulate the Internet and is dismissing strong legal precedent set by both courts and Congress.”

“The fact that Chairman Genachowski, Free Press, and Public Knowledge have dismissed free-market solutions, such as private sector self-regulation and an inter-industry dispute resolution group, shows their intent was never about Net Neutrality; they simply want government regulation of the Internet. And despite promises to forbear from rate setting, the FCC’s vote opens the door to pursue such actions in the future, creating significant uncertainty for broadband expansion and investment.”

“Additionally, ATR commends Commissioners McDowell and Baker for standing up against this overreaching regulatory step by dissenting against the unwarranted Notice of Inquiry.”

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The following article by ATR's Kelly William Cobb was published in today's edition of The Daily Caller:

Today, the Federal Communications Commission unveils its plan to regulate the Internet. The details are uncertain, but regardless of whether the FCC’s Internet takeover scheme is simply bad or outright horrendous, the move marks something significantly more important: the FCC has gone completely rogue. Hijacked by pronounced socialist organizations, the Commission is bucking strong opposition from the courts, U.S. Congress, and American public in a ruthless pursuit to regulate the Internet.

The first sign that the Commission couldn’t care less about a system of checks-and-balances came in April when the FCC was handed a devastating loss by a U.S. Court of Appeals. The court found that since the Internet has always been an unregulated “information” service, the Commission was “shattering” the bounds of its legal authority by trying to regulate it through so-called net neutrality rules.

Knowing he would lose an appeal of the decision, FCC Chairman Julius Genachowski found solace in longtime friends at the organizations Free Press and Public Knowledge. Before the court ruling, Public Knowledge called for the FCC to reclassify the Internet from an “information” to a “telecommunications” service, arguing it gave the Commission sounder legal authority for net neutrality. They also said it would allow the FCC to set prices and collect data from service providers. FCC spokeswoman Jen Howard concurred, stating that the Court ruling did not “close the door to other methods” to regulate the Net. This is the same Jen Howard that served as Free Press’s press director before Chairman Genachowski offered her the FCC gig, despite promises that lobbyists and special interest groups would be barred from Administration jobs.

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This Thursday, the FCC opens up comments on its proposal regulate the Internet. While no one is quite sure all that it will contain, Scott Cleland (a long-time telecom policy expert and insider) has pieced together recent FCC filings from Google to outline how Net Neutrality regulations could be part of a grand plan to control how virtually all media enters your home. Here's a brief summary:

Under the guise of “Net Neutrality” and “consumer protection” the FCC would begin regulating Internet access for the first time under a completely new regulatory scheme (even though they lack the authority to create it). Meanwhile, the FCC would push regulations – cloaked in the heart-warming language of competition and innovation – mandating that your cable box (known as a set-top box) become a “broadband gateway device” controlling access to your Internet, TV, and phone. The FCC has already started looking at set-top box regulations in their National Broadband Plan.

This plan outlines a dark hypothetical world that would effectively destroy any future competition for services and turn our nation’s networks into “dumb pipes” under government centralized control. Everyone will buy an Internet/TV/Phone connectivity box that the government approves. Everyone will pay rates for service that the government sets. And everything passing through your Internet, TV, or phone would become subject to the FCC’s consistent regulatory whim.

Worst of all, this extreme case of political favoritism for Google’s business model (which is developing set-top boxes and carrying all content to users for "free") is not out of the realm of possibility. Both Google and the socialist organization Free Press have long pushed for such regulations and both are arguably the closest groups to FCC Chairman Julius Genachowski. They are also strong supporters of President Obama who are calling for their payoff. The former head of Google’s policy shop is now Chief Technology Officer at the White House and Free Press’s former press director is the FCC’s spokesperson.

There are a lot of hurdles for the FCC should they choose this horrendously anti-free market route to take over the nation’s Internet networks and control the flow of media. Already facing severe bipartisan opposition from Congress and the court, the FCC would certainly invite another legal challenge. But if it works, Internet, phone, and TV service will simply become Google Chrome, Android/Google-Voice, and Google TV.

Since we noted the opposition to the tax and spending components last week, another survey by Rasmussen Reports has found alarming public concern about free speech violations and government content control that could result if Uncle Sam (read: taxpayers) starts cutting checks. Here are some highlights:

85% believe that maintaining freedom of the press is more important that supporting the newspaper industry.

69% believe that government funded media will avoid criticizing government policies.

64% think that if government pays the salaries of journalists, they will place limits on what those journalists can cover (including 41% who think it is very likely).

Only 19% think government should take steps to save traditional forms of journalism, while 60% oppose it.

Wrapping this all together, 71% oppose a government bailout of the newspaper industry. So, while we appreciate FTC Chairman Leibowitz’s hesitations about the iPad tax, I hope he shares the same negative sentiments for the tax on Internet, cell phones, online ads, and spectrum, as well as proposals to boost subsidies for the Corporation for Public Broadcasting, local news, and outright government funding of journalist salaries, amongst others.

So, where on earth are all these horrendous ideas coming from? The same neomarxists at Free Press who are waging another war to regulate the Internet under Net Neutrality. Not only did Free Press founder Robert McChesney testify before the FTC at a previous workshop on media bailouts, but almost all of the tax and spend recommendations the FTC listed came directly from his work. Compare, contrast, and learn how McChesney's socialist ideas wound up in the FTC's plan.

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The political battle over Internet regulation has escalated over the past year into nuclear war. The FCC begins the process to impose onerous regulations on Internet access next week, while radical socialists at organizations like Free Press and Public Knowledge continue to call Net Neutrality a “consumer protection” and free-market advocacy groups (like ATR) call it a “government takeover” of private business management practices. At the end of the day, however, the dispute is much more technical; it’s about how Internet service providers manage increasingly larger data flows on their networks to prevent congestion, while balancing the concerns of content providers who want to make sure their material reaches broad audiences.

Enter the free-market approach to Net Neutrality. This week, ISPs and content providers came together to form a private working group called the Broadband Internet Technical Advisory Group (or BITAG). It’s headed by a well regarded technologist (Dale Hatfield) and there is not a government bureaucrat sitting at the table. It is a private dispute resolution group with a neutral moderator whose mission is simple: to educate policymakers on technical issues, minimize the policy disputes, and think of new ideas for managing Internet networks.

Thus far, the group has received relatively favorable praise, but organizations like Free Press and Public Knowledge gave only half-hearted support to the group, stating “is not a substitute for the government setting basic rules of the road for the Internet” and “it is not a substitute for FCC rules,” respectively. This shows the true colors of Free Press and Public Knowledge. For them, it has never really been about “consumer protection” to ensure full access to web content. If content providers in BITAG are assuaged of concerns that their material can reach all audiences, then individuals should have no reason to think they will be prevented from accessing sites or data (as they never really have been to begin with).

For Free Press and Public Knowledge, Net Neutrality is a means to an end of complete government regulation and ownership of the Internet. It is not just managing networks and data, but the government completely dismantling privately owned networks and running a public, monopoly Internet service provider. In their world, the first step is for private business to become the puppet of a larger government mission, which they determine.

But disputes between private businesses – like Net Neutrality – are best solved through free-market solutions like an open discussion between engineers and executives, not onerous regulations imposed by politicians and bureaucrats. BITAG will help facilitate this free-market dispute resolution and hopefully provide a solution. ATR hopes that it will also take the “Net Neutrality” debate off the plate of the FCC and halt the Commission’s political favoritism for select business models and third-party groups.

In the meantime, the FCC still plans to begin rulemakings on Internet regulation next week, despite BITAG and despite Congress and the court telling it otherwise. This leaves us with a couple important questions: if BITAG has the potential to resolve these disputes, then who is running the FCC? Free Press and Public Knowledge or Chairman Julius Genachowski? And what is the FCC’s end game if the dispute over network management practices can be resolved? I certainly hope it’s not the big government worldview that Free Press and Public Knowledge secretly envision.

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Last week, we chastised a Federal Trade Commission draft proposal on the "reinvention of journalism" that would raise $35 billion in taxes for a media bailout. Turns out we weren’t alone in our opposition to the idea. A survey this week by Rasmussen Reports found overwhelming opposition to taxpayer subsidized journalism. Here is how the proposals panned out:

This push by the FTC for taxpayer subsidized journalists has been heavily influenced by the pronounced socialist and founder of Free Press, Robert McChesney. While the report cites concerns that the industry is struggling to monetize itself as advertising and subscriber revenue declines, this uncertain transition between business models has provided an enormous opportunity for exploitation by socialists like McChesney who have called for the end to private, independent media (see here and here).

However, boosting the boondoggle of public media and having the government step in to “reinvent” the industry instead of letting the industry reinvent itself raises enormous concerns for First Amendment violations and increased political bias in journalism. As PFF’s Adam Thierer has pointed out, a recent Pew study found that “75% of all news executives surveyed – and 88% of newspaper executives – said they had ‘serious reservations,’ or the highest level of concern, about direct subsidies from the government.” In other words, the media prefers its independence from government and few journalists long to become it’s puppeteered mouthpiece.

Further, 58% of respondents in the Rasmussen survey were “confident that online and other news sources will make up the difference” if traditional media does take a hit. Perhaps this is a sign the American public is growing tired of the government consistently trying to buttress failing business models, instead of letting companies adapt naturally to economic realities and changes in consumer demands that exist in a free market. Or at least it’s a sign that the public isn’t buying this big-government solution for the “reinvention of journalism,” as the FTC creepily calls it.

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“Thanks for all that unabashed liberal support, Mainstream Media! Now, here’s a ton of other people’s money.” Or at least that’s what the Federal Trade Commission’s recently released proposal on the “reinvention of journalism” may as well read. The FTC’s draft report would toss journalists as much as $35 billion per year, citing the inability for the industry to monetize itself in the wake of advertising and subscriber revenue loss. So, since you didn’t want to subscribe to newspapers, the government wants to make sure you continue to pay the industry in the following ways:

Tax on Consumer Electronics:Aptly dubbed the iPad tax, a 5% tax (presumably on top of your current sales tax rate) would raise $4 billion.

Internet Service Provider/Cell Phone Tax: A tax of 3% would raise $6 billion a year – while causing prices to rise and consumers to drop service at the same time.

Advertising Taxes: A 2% tax on ads would presumably net between $5 and $6 billion per year, as well an additional $2 billion from changing how businesses could expense it. Oddly, the report also says that 80% of newspaper revenue comes from ads. Taxing and discouraging the largest revenue source for papers to help monetize and save the industry is sure to have the complete opposite effect.

Tax on Broadcast Spectrum: At a rate of 7%, a tax on the spectrum that carries radio and television would raise between $3 and $6 billion.

And what will all this revenue get the American people? From the report:

Establish a “Journalism” division of AmeriCorps

Increase Funding for Corporation for Public Broadcasting

Establish a National Fund for Local News

Provide a tax credit to news organizations for every journalist they employ

Establish Citizenship News Vouchers (you get to choose what non-profit media outlet gets $200 of your tax money, but you don’t get to keep it yourself)

Grants to universities to conduct investigative journalism

This is a blatant boondoggle for public media. Additionally, what the government calls “reinvention” would cement in place old business models and prevent the industry from reinventing itself. Traditional media is trying to find new ways to monetize and create innovative new business models, yet the FTC’s proposal would remove all incentive for this progress to continue. The report is so backwards looking that it only mentions the word “blog” once, and only in the context of advertising.

The government has a disgusting habit of turning a fire hose of taxpayer money at every single industry that is undergoing a rough, but necessary transition. And while no taxpayer bailout is ever warranted, the last industry that should be ever be propped up by the government is the media. It opens the door for severe First Amendment violations, extreme political bias (journalists will remember who cuts their check), and it shatters the notion of an independent media necessary in a free country. In short, it leads us ever closer to an American Pravda.

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The FCC is once again trying to make the market for broadband sound like a failure to push for greater oversight and regulation of Internet service providers. In conjunction with their campaign to collect information about consumers’ Internet speeds, yesterday the Federal Communications Commission released a survey that found four out of five Americans aren’t aware of their broadband speed. Their consumer affairs chief said that “people need to know if the advertised speed is the real speed that they're going to get” (despite the many websites for consumers to checkthemselves). Yet, buried deeper in the report is a more important statistic: 91% of Americans are happy with their broadband connection.

The FCC’s obsession with knowing the speed above the satisfaction highlights exactly why the FCC does not understand how markets work. In a free-market, people pay for a service based on the value of what they get. If someone only checks their email and reads the news, they certainly don’t need 30 mbps speed. Then again, if someone is streaming Hulu videos and downloading all 9 seasons of the X-Files, they will obviously demand higher speeds. Neither party necessarily needs to know the exact speed they're getting, as long as their service meets their demands. If it doesn’t, they’ll opt for higher speeds.

FCC Chairman Genachowski claims that “the more broadband subscribers know…what speeds they get, the more they can make the market work and push faster speeds over broadband networks.” First, as Michael Turk at Digital Society has previously pointed out, “most people will pay the minimum that affords them a good experience.” That means people who only check email and buy 50 mpbs speed are likely to switch to slower, not faster speeds, if they find out. Additionally, while 50 mbps instead of 10 mbps may sound fantastic, it is unnecessary to pray on people’s whimsical desire for the next cool thing if people are overwhelmingly satisfied. The government has no place artificially steering the market or drumming up reasons for more unnecessary oversight or regulation.

First, there is absolutely no reason to suspect such a proposal will not lead to media and Internet content regulation. Many of these groups are Net Neutrality proponents, who claim a desire to regulate Internet networks, but not content. Yet, now they are pushing for inquiries on what sorts of content should be rooted out. Many have also long pushed for the Fairness Doctrine, which regulated political speech.

Additionally, the FCC’s definitions of “hate speech,” “extremism,” or “misinformation” will be nearly impossible to define. They could also be subject to the whims of political tides, with the party in power using the agency to try to censor or publicly discredit dissenting opinions. They could be expanded to track other sorts of politically-charged speech. Indeed, the letter is wrapped in politically controversial issues, referencing a ridiculous report from the Department of Homeland Security last year, which called limited government advocates “rightwing extremists,” and the immigration law recently passed in Arizona, amongst other things. Love or loathe the DHS report or the Arizona immigration law (ATR does not take a position), but the broader questions raised by this letter have nothing to do with it.

The measure could easily lead to First Amendment violations or the Fairness Doctrine. No one should condone hate speech, but the First Amendment guards your right to say even incredibly false things, regardless of whether society overwhelming agrees or disagrees. Just as consumers in a free market are the best regulators of business, individuals in a free society are the best regulators of others’ words – and inflammatory rhetoric is met with backlash and harsh criticism (like the progressives’ very letter).

Further, while the Fairness Doctrine (abandoned over 20 years ago) mandated equal time for opposing viewpoints, this would instead have a politically-appointed government agency providing that opposing viewpoint, or at least declaring that one viewpoint is wrong – something significantly more disconcerting. The coalition labels this criticism as a “red herring,” but using a politically-correct vessel about “hate speech” to push for government monitoring of media and the Internet is itself a “red herring.”

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Yesterday, I took issue with progressive organizations calling Internet regulation a mere “consumer protection.” Today, I have a piece in the Washington Times taking aim at the Federal Communications Commission's equally false rhetoric as they try to market Net Neutrality as a “bipartisan” and “consensus” approach. Nothing could be further from the truth. From the op-ed:

The commission says there is a "consensus that the Internet should remain unregulated." That much is true; however, the FCC's claim that its proposal is this consensus approach that "does not regulate the Internet" is patently false. To get here, the commission is turning its back on years of law and precedent to redefine the "Internet" as the content that is accessed and delivered, not the entire network itself.…

Consistent with this strategy of wrapping pleasant rhetoric around onerous actions, the commission and proponents of Internet regulation also claimed the plan is "bipartisan" and has the backing of Congress. The organization Free Press went so far as to say Congress had declared the FCC should "do whatever it takes" to enact net neutrality. Yet, on the day of the plan's release, proponents only cited a letter from House and Senate Commerce Committee Chairmen Sen. John D. Rockefeller and Rep. Henry Waxman, an Op-Ed by Sen. Byron L. Dorgan and a couple of other lawmakers' press releases.

In stark contrast, this week 74 House Democrats sent the commission a letter chiding them for pushing regulations that will "deter needed investment," "jeopardize jobs," and bypass congressional approval in the process. Thirty-seven Senate Republicans also sent a letter offering much sharper criticism and questioning the FCC's legal authority.